How is a second home abroad taxed in Switzerland?

Many taxpayers in Switzerland own a second home abroad, for example in France, Italy, Spain, or Germany. The question often arises whether this leads to double taxation, especially when property and residence taxes are already paid abroad and an imputed rental value must additionally be declared in Switzerland.

Important Note on the Abolition of Imputed Rental Value: On September 28, 2025, the Swiss electorate voted with 57.7% to abolish the imputed rental value. This regulation is expected to come into force at the earliest on January 1, 2028. Until then, the rules described below continue to apply.

This article provides an overview of the most important tax rules related to foreign real estate and double taxation agreements (DTA).

Where May a Foreign Property Be Taxed?

According to Switzerland's double taxation agreements with most EU countries, the so-called situs principle applies:

• The right to tax real estate generally lies with the state in which the property is located.
• Ongoing taxes such as property taxes, real estate taxes, or residence taxes are therefore levied abroad (e.g., Taxe foncière and Taxe d'habitation in France).

Switzerland refrains from directly taxing the foreign property itself.

Why Must the Second Home Still Be Declared in the Swiss Tax Return?

Even though the right to tax lies with the foreign country, there is a declaration obligation in Switzerland. The foreign property is recorded in the tax return with:

• the market value or tax value
• the imputed rental value
• any mortgages and interest on debt

However, these details do not result in direct income taxation but have an indirect effect.

Rate-Determining Effect (Progression Clause)

The imputed rental value of the foreign property declared in Switzerland is subject to the progression clause. This means:

• The imputed rental value is not actually taxed.
• However, it is added to other income to determine the applicable tax rate.
• This higher tax rate is then applied to the income taxable in Switzerland.

This procedure is compatible with double taxation agreements, as Switzerland does not consider the property itself but only the economic capacity.

Wealth Tax and International Allocation

The same applies to wealth tax:

• The foreign property is excluded from taxable wealth in Switzerland.
• However, it influences the wealth tax rate (progression).

Furthermore, an international debt and interest allocation takes place:

• Mortgages and debts are distributed proportionally according to the location and value of all domestic and foreign assets to the tax domiciles.
• Interest on debt and maintenance costs are considered proportionally.
• This can result in fewer debts and interest on debt being deductible in Switzerland, thereby increasing taxable wealth and income in Switzerland.

Taxation of Rental Income

If the second home is rented out, the following applies:

• Rental income is taxed in the state where the property is located.
• In Switzerland, it must be declared but is also only rate-determining.
• Maintenance costs, administrative costs, and interest on debt are considered within the framework of international tax allocation.
• An excess of acquisition costs (when maintenance costs are higher than income) is only considered for rate determination in direct federal tax. A few cantons allow offsetting with Swiss income for cantonal taxes.

Sale of the Foreign Property

When selling a second home abroad:

• Capital gains on real estate are taxed in the state where the property is located.
• In Switzerland, the gain remains tax-free but again influences the tax rate.

Important Note: In many countries, the property is liable for the capital gains taxes of the selling person. These should be set aside before purchase to avoid risk.

Outlook: Changes from 2028

With the abolition of imputed rental value from presumably 2028, the rules will change:

• The imputed rental value for owner-occupied foreign properties will be completely eliminated.
• However, the rate-determining effect remains – the property and its income must continue to be declared and influence the tax rate.
• At the same time, deduction possibilities for maintenance costs and interest on debt will be eliminated (except for rented properties and with restrictions for first acquisition).
• Cantons can newly introduce an object tax on second homes – however, this would only apply to second homes in Switzerland, not to foreign properties.

Conclusion

A second home in an EU country does not lead to prohibited double taxation in Switzerland, even if:

• property and residence taxes are paid abroad and
• an imputed rental value is declared in Switzerland (until its presumed abolition in 2028).

Switzerland does not tax the property directly but only considers it for determining the tax rate (progression clause) and for the international allocation of wealth and debts. This system complies with double taxation agreements.

Since the correct allocation of foreign wealth, imputed rental value, mortgages, and maintenance costs is complex, professional tax support is recommended for second homes abroad to correctly utilize all deductions and ensure proper DTA application. In view of the upcoming reform, longer-term planning (renovations, amortizations, purchases/sales) should also be made with regard to the new regulations.